Reply to: Buy to Let

[Tool]

Does it make any sense at all to get a BTL mortgage now? Is it still a viable investment? At todays prices, will rents even pay an interest only mortgage?

Yes, as long as you put a high deposit!
Anyway, a lender will only lend you as much as you can repay by letting the property. They are very strict about that.
It is still possible to lend 85% of the house value in some regions, like the North...

I ask as I have friends that are getting into BTL now and swear it is still the only sensible thing to do "for the future".

Be extremely careful about people trying to sell you new builts with "investor package", 5% deposit paid + stamp duty paid, mortgage arranged, etc. The truth is the price of new builts are usually inflated, so you may need around 5 years to have the market reach the price you actually paid! You may find this painful when switching to the SVR after 2 years!
Strangely enough, their rental calculations seems to fit perfectly in the mortgage repayments!...

[ChimpMaster]

Yes MO is a bit more work but you get 50% more rent and also your exposure/risk is reduced because if you lose 1 tenant you still have 4 others to cover the mortgage.

[threaded]

A lot of the hassle is removed by only taking older gentlemen. Single women and young blokes are problematic. Single professional woman, nurses etc. are an absolute menace, and they wonder why it is so hard to find somewhere cheap to live. It's cause you're trouble darlin' innit.

[Lockhouse]

The only way a BTL will work is with Multiple Occupancy. This is a little more difficult to get into and you have to get a license from the council (put in fire doors, connect smoke detectors to the mains, ensure fire escape routes etc etc).
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This requires a lot of work and is a lot of hassle dealing with 3 or 4 times as many tenants. As well as the problems dealing with "the lower end of the market"...

[ChimpMaster]

Its the way Rachman used to do it in London in the 1950's & 1960's
Its also a sure sign that an area is being "de-genderfied"

"de-genderfied" , what's that , a bit like the CK One spray?

[Hart-floot]

The only way a BTL will work is with Multiple Occupancy. This is a little more difficult to get into and you have to get a license from the council (put in fire doors, connect smoke detectors to the mains, ensure fire escape routes etc etc).

So for example, you buy a 3 bed semi and make all of the rooms bedrooms. So say you have 3 bedrooms upstairs and then you make the 2 rooms downstairs into bedrooms. Tenants share the kitchen and bathroom facilities.

You could even fit sinks in all rooms, and you may have to fit another toilet in.

You would rent out each room individually, which should mean you get approx 50% more rent in total.

I know people that have made millions from this... unfortunately I'm not one of them

Its the way Rachman used to do it in London in the 1950's & 1960's
Its also a sure sign that an area is being "de-gentrified"

[ChimpMaster]

The only way a BTL will work is with Multiple Occupancy. This is a little more difficult to get into and you have to get a license from the council (put in fire doors, connect smoke detectors to the mains, ensure fire escape routes etc etc).

So for example, you buy a 3 bed semi and make all of the rooms bedrooms. So say you have 3 bedrooms upstairs and then you make the 2 rooms downstairs into bedrooms. Tenants share the kitchen and bathroom facilities.

You could even fit sinks in all rooms, and you may have to fit another toilet in.

You would rent out each room individually, which should mean you get approx 50% more rent in total.

I know people that have made millions from this... unfortunately I'm not one of them

[Lockhouse]

BTLs are a great idea if you got in with a £300 pm mortgage and can rent it at £600pm.

They are a bad idea if you got in last week with a £1000pm mortgage and a £6 00pm rent.

Indeed. The block of flats I have my BTL in is no longer an economic proposition (mine has doubled in value since 2000) and you would be better off putting your money in a high interest account or funds.

[Euro-commuter]

Question to ask I guess is can you afford to stay in it long term (incase things go tits up)?

Question to ask is, "Do you feel lucky, punk?"

[ASB]

BTLs are a great idea if you got in with a £300 pm mortgage and can rent it at £600pm.

They are a bad idea if you got in last week with a £1000pm mortgage and a £6 00pm rent.

I have a house valued at about 220k. It has debt of approx 110k and interest payments of about 5k. It yields after agents fees etc 7k. Or about 1.5k after tax.

Now if flogged it and stashed the cash then I should be able to make about 4k after tax, so I'm still implicitly gambling on some capital appreciation to make up the shortfall. All I'm really saying is that whilst the leverage can work immenselt in your favour it can work the other way too, also need to consider the opportunity cost of the capital tied up.

for sure the guy in your first example is miles better of than that in your second but people seem to have lost track of one of the prime reasons for property investment. It's for long term income (which is why I keep it).

[Numptycorner]

I pay £350 a month to rent a room in a flat (dead money). I could mortgage the flat on 85% for £700 and then get a room-mate. Effectively the cost is the bills and the deposit (which is fairly sizeable).
When I leave the contract I could rent it out for circa £700 p/m.

One in the block has recently sold (in last 4 months) for 10k more than a slighlty more scruffy one that has come up for sale, so even if the market hardly shifts I could see 10k profit from a lick of paint.

I could plonk it back on the market in a year and get my 10k plus on a 40k outlay, of course I could get shafted......


hmm the more I think on it the more I think it's a gamble too far........

I bet as soon as I bought one the crash would happen

[Sockpuppet]

BTLs are a great idea if you got in with a £300 pm mortgage and can rent it at £600pm.

They are a bad idea if you got in last week with a £1000pm mortgage and a £6 00pm rent.

[Numptycorner]

Sombody I know is in precisely that position. Recently bought the first house to let. Rent doesn't even cover an interest only mortgage. They live in the family home.

So, they are actively paying sombody to live in it gambling on capital values being enough to repay the subsidy plus transaction costs for entry and exit.

Jesus, how charitable of them

[Numptycorner]

If you assume house prices fall by 10% over the next two years, your 22.5K now becomes £7.5K?

Exactly, it's a gamble.

Have a look at the BTL trend:

http://www.telegraph.co.uk/property/...pension219.jpg

330,000 BTL mortgages issued in 2006 (total BTL 850,000).

BTL is a self fulfilling prophecy. Is it sustainable?

Who knows? Question to ask I guess is can you afford to stay in it long term (incase things go tits up)?

[_V_]

Have a look at the BTL trend:

http://www.telegraph.co.uk/property/...pension219.jpg

330,000 BTL mortgages issued in 2006 (total BTL 850,000).

BTL is a self fulfilling prophecy. Is it sustainable?